As we update our archives on elpr.org, we are going to provide updates on our previous notes & articles. Hopefully, these updates will foster further discussion of these important environmental issues.
With changes in the automobile industry, we thought it was timely to highlight a note from 2007, entitled “Congress’s Tax Incentives Send Mixed Signals for Automobile Buyers: Should Americans Buy Gaz Guzzlers or Hybrids?,” written by Bradley A. Ridlehoover. Ridlehoover argues that Congress should close the SUV loophole in the tax code and make the hybrid tax credit more accessible to people with lower incomes. In addition, he argues that Congress should lift the production conditions for the tax credit.
Under the Energy Policy Act of 2005, when a car manufacturer sells 60,000 hybrid vehicles, the tax credit for the purchase of the manufacturer’s hybrid vehicles is phased out. This phase-out was meant to create a level playing field for the major car manufacturers. In other words, the tax incentives would not provided a competitive advantage for the popular Toyota Prius. General Motors buyers could receive the tax incentive for many years because GM did not have a viable hybrid model when the law was passed. The phase out limits were meant to help American car manufacturers who had not established themselves in the hybrid market.
Now that American Car manufacturers have faced the harsh reality of $4 gas, and some have ultimately been forced into bankruptcy, will the government force competition in the hybrid market?
Ridlehoover’s article gives an excellent overview of the previous incentive scheme. He also explains the SUV loophole. Does Congress need to discourage SUV use or will the free market handle the problem? Is now the time for changes to the hybrid credits? Are hybrid vehicles a viable product now that many of the tax incentives have expired? Congress subsequently made changes so that those with lower incomes would derive more of a benefit from the hybrid tax incentive, but the debate over whether the government should endorse certain types of vehicles through tax rebates and efficiency regulations rages on. Now that the government owns a majority stake in GM, what action should Congress take?
One Comment
Hey,
I just found this link: http://energyoutlook.blogspot.com/2007/11/closing-suv-loophole.html. This link appears to raise some important issues that were touched in the ELPR article and may add some useful insights for future research. In particular, what struck me was the question raised in the article. In particular, it appears that the question is: Are automakers’ claims justified and what are the laws with respect to businesses having the right to conduct their own private affairs versus that of the government regulating laws to protect the environment? The arguments by business interests (i.e. the manufacturers) may be muted by the ninth circuit ruling and the idea that fuel economy standards are already increasing that closing the loophole actually makes sense to some extent. Anyway, in addition to the other links, I think this might add some substance to the article.